* Energy Transfer offers $33/shr, a 17 pct premium
* Deal, including debt, valued at $7.81 bln
* Deal expected to close in Q1 2012
* Deal expected to immediately add to distributable cash
(Adds conf call details, analyst comments; Updates shares)
By Krishna N Das
BANGALORE, June 16 Pipeline operator Energy
Transfer Equity LP will buy smaller rival Southern Union
Co for about $4.1 billion to nearly double its capacity
and position itself for likely future gas demand both at home
and from emerging economies.
Southern Union shares jumped more than 17 percent to their
highest in almost 4 years, and were trading above the $33 per
share offer price, suggesting investors think the bidding could
Gordon Howald, analyst at East Shore Partners, said Southern
Union has had activist shareholders in the past, and there could
be pressure on the company to push for more of a premium, though
he said the 17 percent premium on offer was attractive.
Despite weak natural gas prices NGc1, production has been
rising as energy companies pile into shale fields -- underground
rock formations rich in oil and gas.
Evolving technologies are helping them tap into these
reservoirs that could meet U.S. fuel needs for a century and
increased demand from fast-growth economies such as China.
Increased production from shales such as Marcellus in the
eastern United States has also benefited companies transporting
and processing natural gas. A number of midstream companies have
already expanded related facilities and services.
The combination of Energy Transfer (ETE) and Southern Union
will own more than 44,000 miles of gas pipelines and about 30.7
billion cubic feet of transportation capacity per day, ETE said.
"Energy Transfer has more access to most of the shale plays
than any other pipeline company in the United States," ETE
Chairman Kelcy Warren said on a call with analysts.
"Southern Union goes from those supply hubs to many market
consuming hubs. That is a big thing," he said, noting ETP's past
vulnerability to margins being squeezed.
ETP -- Energy Transfer Partners -- and Regency
Energy Partners LP are the two limited partnership
units of ETE, which compete with DCP Midstream Partners LP
and Enbridge Inc (USA) .
In March, Dallas-based ETE teamed up with Regency to buy
natural gas liquids storage and transport assets from Louis
Dreyfus for $1.92 billion.
SYNERGIES AND SAVINGS
Southern Union shareholders will swap each common share for
newly-issued Series B units of ETE for $33. Including about $3.7
billion of Southern Union debt, the deal is valued at $7.81
ETE said the deal, expected to close early next year, should
immediately add to its distributable cash flow. It expects
synergies of $100 million and one-off savings of $25 million.
Southern Union owns and runs more than 20,000 miles of
pipelines, and serves more than half a million end-users in
Missouri and Massachusetts.
Credit Suisse Securities advised ETE on the deal, while
Southern Union was advised by Evercore Partners.
Units of Energy Transfer rose more than 6 percent to $45.16
on Thursday on the New York Stock Exchange. Southern Union
shares last traded up 17 percent at $33.15.
(Reporting by Krishna N Das in Bangalore; Editing by